Last month, my cousin purchased a new house with the help of a home loan. Since I am also planning to buy a house, I asked him how to calculate housing loan interest. Let me pass on the information that he shared with me:
He told me that the home loan interest rate directly affects how affordable the loan is and how quickly you can repay it. The repayment comes in the form of EMIs that consist of principal as well as interest. A high home loan interest increases your EMIs and a low home loan interest decreases your EMIs.
How to Calculate Home Loan Interest Rate Per Month:
EMI = [ P x R x ( 1 + R ) ^ N ] / [ ( 1 + R ) ^ N – 1 ]
Here R, P, and N are variables.
The EMI changes each time any of the three variables is changed.
You should understand these variables to know how to calculate floating interest rate for home loan.
R = Rate of interest decided by your bank.
N = Number of years for which the housing loan is offered to you. Since EMIs are paid monthly, the calculation of the duration is done in the number of months.
P = The ‘Principal Amount’, i.e. the original loan amount which the bank provides you. The interest will be calculated on this amount.
Check out this example to understand how to calculate interest rate of home loan better:
Let’s assume Rohan avails of a housing loan of Rs. 50L for 10 years at with a 12% interest rate.
P = Rs. 50L
N = 120 months (10 x 12)
R = 12/100/12 = 0.01,
Now, EMI = [ 5000000 x 0.01 x ( 1 + 0.01 ) ^ 120 ] / [ ( 1 + 0.01 ) ^ 120 – 1 ]
EMI = Rs. 71,735.
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Check out this home equity formula to know how to calculate interest rate on home equity:
Equity = Current Property Value – the total outstanding amount payable towards the house loan
There are several home loan EMI calculators available online to help you with the calculation.
Read about the floating interest rate to know how to calculate floating interest rate for home loan:
What is floating interest rate?
What is difference between floating and fixed rate of Interest?
This is all about how to calculate housing loan interest. You don't have to worry about calculting home loan amount. Do as I do and check it online right here.
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How to calculate home loan interest rate?
Nikita
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2021-11-30T15:07:26+00:00 2021-11-30T18:37:48+00:00Comment
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